I am opposed to President Obama’s tax proposal. Of the $858 billion in the president’s proposal, more than 25 percent represents either increased spending or new tax cuts. Neither the increased spending nor the tax cuts are offset with spending reductions elsewhere in the budget. While this bill has been described as an extension of the 2001 and 2003 Bush tax cuts, more than one-third of the bill’s price tag is unrelated to the Bush tax cuts.
This bill perpetuates the favoritism that riddles the tax code. For example, the federal government recently imposed a new 2.3 percent surtax on life-saving medical devices as part of Obamacare but gives distorting and inefficient tax preferences to ethanol producers and racetracks, which are extended in this bill.
While the deficit and debt are serious problems, I oppose solving these problems by raising taxes. Letting existing tax breaks expire is a tax increase and would hurt the economy so I support making existing tax breaks, such as those passed in 2001 and 2003, permanent. Make no mistake: Letting existing tax breaks expire is a tax increase. Government is not being honest with taxpayers when it renews existing tax breaks and calls them new tax cuts. I would support eliminating certain tax breaks that are not economically justifiable if they are offset with reductions in tax rates. High tax rates distort economic decision making, and our corporate-income-tax rate is one of the highest in the world.
While proponents of higher taxes argue that only 2 percent or 3 percent of all subchapter-S and other businesses that are taxed at the individual level would be impacted by the expiration of the Bush tax cuts, about 39 percent of pass-through business income would be subject to tax increases if the top marginal rates are increased to 36 percent and 39.6 percent, according to the Tax Foundation. Pass-through entities represent an increasing share of business activity, and increasing taxes on these job creators will be detrimental to our economic growth.
Even if all of the Bush tax cuts are extended, federal government revenue will reach its historical average of 18 percent of GDP once the economy recovers. The numbers clearly show that the federal government has a spending problem, not a revenue problem. In fiscal year 2010, federal government spending reached 24 percent of GDP, significantly higher than the historical average of 20 percent. Therefore, I support extending the 2001 and 2003 Bush tax cuts, offsetting new spending increases with cuts in existing spending, and eliminating unjustifiable tax breaks with reductions in tax rates so that our tax system has a broader base and a lower rate.
— Rep. Jason Chaffetz represents Utah’s 3rd district.